Is Microsoft Screwing Up the Yammer Acquisition?

Microsoft’s $1.2 billion purchase of Yammer last year generated a lot of excitement about integration of the company’s enterprise social networking integration with SharePoint, which is expected to happen later this year. Now, controversy’s brewing about how Microsoft is handling the acquisition.

Many among Redmond’s enterprise clients, investors, shareholders and end-users were encouraged by the purchase. Social-media functionality has been a major gap in SharePoint, Microsoft’s dominant enterprise collaboration and portal platform. The move seemed to affirm the company’s stated intention to continue developing an integrated set of enterprise services, and the purchase signaled that Microsoft was willing to invest, a lot, in keeping its solutions at the head of the pack.

Not Everyone Is Happy

Clearly, Microsoft sees enterprise social networking as a game-changer. It seems to believe it will be a key point for companies assessing whether to continue with Microsoft solutions like Office, SharePoint, Exchange, Lync and Dynamics. They’re right to see it as critical. Enterprise social is spreading quickly and businesses of all sizes are recognizing its value.

But not everyone was happy about the acquisition. Some Microsoft partners were surprised and distraught to see that any of their products that compete with Yammer were essentially being thrown to the side. Not only did Microsoft undercut much of their growth and adoption potential, it undercut their revenue by pricing Yammer so aggressively — $3 per user per month, down from $15. At that rate, it’s doubtful that Microsoft will recoup the acquisition costs anytime soon.

Organizational Changes

In addition, Microsoft has begun to steadily convert sections of Yammer’s organization to become part of the mother ship. These reorganizations diverge sharply from the original plan. At the time of the acquisition, Microsoft CEO Steve Ballmer and Yammer CEO David Sacks told Yammer’s staff that its organization would remain in place, Sacks continuing to be in charge.

But now Yammer’s top marketing executive, Viviana Faga, report directly to Microsoft. Just recently, the sales staff was informed that they’d become Microsoft salespeople starting July 1. That’s not all: Earlier this month, 20 sales and marketing people were laid off. “This isn’t Yammer anymore,” lamented one employee in an internal post.

There are clear dangers when a company is forced too quickly into a new culture. More than a few people are watching to see how these changes affect Yammer’s up-to-now extremely successful team. Others, especially investors and companies who hope to be a Microsoft acquisition, are watching with special interest.